IP telephony uses the Internet Protocol (IP) to transmit voice as packets over any data network that supports IP. Traditional circuit switched networks, such as the public switched telephone network (PSTN), establish a call by setting up an end-to-end circuit between two telephones. The switched connection is established for the duration of the telephone call, with a fixed bandwidth. In contrast, an IP telephony connection digitizes, compresses and converts the voice signal into IP packets and transmits the packets over the data network. Numerous different calls may share the same network and each participant in a call may have a different bandwidth that varies over the duration of the call depending on the amount of data being communicated over the network at any given time.
Conventional phone service provided over the PSTN requires a subscriber to pay for long distance service based on the number of minutes for the call. Furthermore, if the subscriber would like to add a special service, such as caller id, call forwarding or call waiting, the subscriber typically pays a monthly fee for the service. This fee is paid to the telephone company even if the subscriber does not use the service during the month. IP telephony service operates in a similar way because the subscriber is limited to services provided by an Internet Service Provider (ISP) for a fee during a specific period.